The last thing the long-suffering shareholders of Sinclair Broadcast Group needed was a flap over journalism ethics.

Even before the brouhaha over its reported plan to broadcast a film attacking Sen. John F. Kerry (D-Mass.) as a news special, Sinclair was among the worst-performing stocks of companies based in Maryland, Virginia and the District.

Sinclair stock, which peaked at $15.43 just before New Year's Day, closed Friday at $7.17, down 52 percent from that high. And that was after a strong rebound that began Wednesday following Sinclair's announcement that it wouldn't air the entire anti-Kerry documentary after all. Before that, Sinclair stock fell for nine days in a row in response to the controversy, something the company downplayed Friday.

"Our stock has been hurt by a soft advertising market and a tough economy," said Barry M. Faber, Sinclair's general counsel.

Though not well-known outside Baltimore and the broadcasting business, Sinclair is the nation's largest owner and operator of television stations. Mostly located in medium-sized cities, such as Baltimore, Pittsburgh and Cincinnati, the 62 Sinclair stations reach about one-quarter of the people in America.

Sinclair executives insist the media have misrepresented its side of the story ever since the Los Angeles Times reported Sinclair had ordered station managers to drop their regularly-scheduled programming and run a film in which former American prisoners of war in Vietnam criticized Kerry's anti-war activities.

Sinclair officials note that critics spoke without seeing the program, which hadn't even been completed when the incident began. The show finally aired last Friday night on about 40 Sinclair stations.

You don't have to be a media critic or a political partisan to know that when the talking heads stop jabbering, Sinclair shareholders will be the losers. Even analysts for Baltimore investment firms with long ties to Sinclair warn that the incident is bad business.

"While we will not prejudge the content of the show and its potential long-term implications, we do believe that [fourth quarter] advertising revenue is being impaired due to cancellations," wrote Sean P. Butson and Lamont N. Corprew, broadcasting industry analysts at Legg Mason, in a memo to clients last week.

Burger King was the best known company to announce it was pulling its advertising, saying it would not run commercials that had been scheduled to appear on nine Sinclair stations on the same day as the anti-Kerry documentary. The issue was particularly sensitive for Burger King because the fast-food chain has been running a series of commercials featuring popular musicians urging young people to register and vote.

Butson and Corprew kept their rating of "buy, high risk" on Sinclair stock but scaled back their estimate of fourth-quarter revenue by $5 million and cut their projection of quarterly cash flow by $4 million.

Sales and profit projections were also cut by Deutsche Bank, which kept its "hold" rating on the stock. Sinclair does investment banking and other business with both Legg Mason and Deutsche Bank, which took over Alex. Brown & Sons, the old-line Baltimore investment firm.

Wachovia Corp. downgraded the stock from "buy" to "hold." Calling Sinclair by its stock-trading symbol, Wachovia's broadcasting analysts said, "SBGI's choice to air an anti-Kerry documentary pre-election has created a political and headline firestorm. It has also disturbed investors."

"SBGI seems to have a recent habit of high-profile, controversial editorial choices. This heavier handed path chosen by SBGI opens it up to potential business and regulatory retaliation."

The move was also slammed by the team of regulatory and policy experts at Legg Mason's Washington office, whose job is not to analyze the finances and operations of companies but to explain how they will be affected by what goes on in the capital.

Never mind the journalism ethics issues, they said in a recent issue of Legg Mason's Telecom & Media Insider newsletter. The key question is: "Is this decision good for investors in terms of increasing the odds of favorable deregulation both for Sinclair specifically and broadcasters generally?"

"We think not, as it would likely turn Sinclair into another poster child for critics of the industry."

Deregulation of broadcasting is what made it possible for Sinclair to build its chain of television stations. As Faber puts it, "we are a deregulation company."

Sinclair is scheduled to announce its third-quarter results Nov. 4. The results won't reflect any impact of the controversy, which came up after the quarter ended Sept. 30, but are expected to be down because several Sinclair stations in Florida were knocked off the air by hurricanes, which also hurt their advertising sales.

In the first half of this year, Sinclair posted revenue of $338.2 million and turned a profit of $17.9 million (21 cents a share) compared with a loss of $5.9 million (7 cents) in the first half of the previous year.

The company is controlled by chief executive David D. Smith and his three brothers. Their father, Julian Sinclair Smith, bought Baltimore UHF station WBFF in 1971. The family business grew slowly until 1995 when it sold shares to the public and began an aggressive expansion plan. Using high-risk, high-yield "junk" bonds for financing, the company then began buying stations around the nation, including affiliates of all the networks.

Until 1996, there were strict federal limits on how many television stations one company could own and restrictions on owning more than one station in the same city.

Today, Sinclair operates two stations in about 18 other cities -- more two-channel markets than any other television company. The company has been an industry leader in pushing the Federal Communications Commission to further loosen the rules so it can create more two-channel "duopolies" in smaller markets.

Faber said that besides working through the FCC to change the ownership rules, Sinclair has twice been a plaintiff in lawsuits which led to court decisions tossing out FCC ownership rules. The company still is working to persuade the agency to relax ownership restrictions.

As Legg Mason's policy wonks pointed out, "when media ownership is an inside-Washington game, it tends to move toward deregulation. But when it becomes a front page issue, support for deregulation tends to erode."

In other words, this incident is not just bad for Sinclair and its shareholders, it's bad for the whole broadcasting industry.

Whether Sinclair can cool it may depend on the fallout from Friday night's show. The dust is still settling, Legg Mason's Washington strategist said in a weekend update on the Sinclair situation.

"It's not yet clear that the company has completely defused the backlash from bloggers, boycotts and concerned shareholders," he said.